Consumers pay the price for mergers

David Lazarus

Los Angeles Times

The next time a big company tells lawmakers and regulators that a megamerger will “result in lower prices for consumers, I hope everyone in the room breaks out in laughter,” said David Lazarus. Executives love to play up consumer benefits when arguing for a merger to go through, yet rarely do their promises come to fruition. We’ve seen it in the oil, pharmaceutical, banking, and insurance industries: “Companies merge, prices go up, service declines.” The latest firm to demonstrate this truism is AT&T, which repeatedly insisted that its $85 billion takeover of Time Warner “would practically be a Christmas present for consumers.” Yet within weeks of the deal being approved last month, AT&T announced it was hiking the price of its DirecTV Now streaming service by $5 and more than doubling its “administrative fee” for wireless customers to $1.99 a month. “What can be done?” Well, in the future, regulators and lawmakers could “get any claims of lower prices in writing.” If a firm can’t commit to cutting prices, then it shouldn’t be allowed to tout this as a merger benefit. Then, officials should revisit mergers a few years later and report if the professed claims were actually delivered. Companies could avoid any bad publicity by following a simple rule: “You promise something and you deliver on that promise.”